What is a Stock Ticker? How to read?
While others see those stock ticker figures as a nuisance, investors and traders use them to stay on specific stocks' latest market sentiments and activities.
Numbers, letters, and figures are part of an investor or a trader's life. These things are a constant companion and advisor both for new and seasoned investors and traders. However, the importance of these is more profound on the beginning investors and traders.
As a beginning investor, you already know that market prices are never fixed and that stocks' prices are always on the move. They are always affected by certain factors, and these movements have an equal effect on investments. Therefore, it is imperative for you as an investor or trader to be updated on these changes and activities. And that is what a stock ticker provides; it gives a screenshot of the latest movement and change in your favorite and not-so-favorite stocks.
You may not be that acquainted with the term "stock ticker," as you probably never heard of it, but there is a high chance that you saw it already; it is just that you do not know what it is called. Stock tickers are those baffling numbers, letters, and arrows you see on the side or bottom of the financial programs or financial and business networks you watch. And obviously, they did not put them there randomly nor to serve as a decoration. These figures have a purpose. While many unfamiliar with business disregards these figures as a nuisance, investors and traders treat these as a resource to monitor and keep on track of the market and the companies they have stakes in. They see these figures as screenshots of the latest market happenings, movements, and trends that may heavily contribute to the process of making their investing and trading decisions.
Stock ticker's role in an investor or trader's life is therefore essential. So, if you are a new investor or trader and want to know more about stock tickers and how to read them, continue reading until the end of this article.
What is a Stock Ticker?
Different security prices, particularly stocks, are constantly changing, as everyone who has ever watched a financial network or visited a market website knows. Hence, investors and traders need to be continuously updated on these changes. And this is what a stock ticker does; it reports the price and movement of particular securities such as the stocks of specific companies continuously in a trading session. In other words, it provides a "tick." A tick determines whether the movement of the stock price is positive or negative. Aside from the tick, other relevant information is included in the stock ticker, such as the trading volume, price, and stock symbol.
However, not all stocks are seen in a stock ticker at a certain period. Thousands of investors and traders worldwide are trading stocks at any given time. Many stocks are being traded simultaneously throughout the day; thus, placing all of them in the stock ticker would be impractical. Hence, only the most significant movers (biggest price hike and price reduction) from the previous session or those trading under high volumes are displayed in the stock ticker.
The price, the volume, and "newsworthiness" are some of the factors that determine whether a stock will appear in the stock ticker. These are the reasons why some stocks or quotes are being prioritized over others. For example, a stock that trades in millions a day will appear more than the stock that trades in thousands; the same goes for a company that breaks a piece of big news. Therefore, their appearance most of the time is not predetermined. Why most of the time? Because there are two instances where they appear in a specific order before the trading session starts and after it has ended. And at these times, the last quote of each stock are the only things shown.
This is why what you see on a ticker could change suddenly, especially if there are stocks trading in high volume. So, if you see the ticker symbol for the stocks you own, note it fast since it could be some minutes before you see it again, including its latest trading activity.
History of Stock tickers
The stock tickers you saw on the television or the internet were not the way they used to be. Electronic stock tickers are based on the telegraphic ticker tape created by Edward Calahan in 1867. Calahan is an employee of the American Telegraph Company. Four years after the original creation, Thomas Edison improved the work of Calahan and patented it afterward.
A ticker tape records all of the movement that happened on the trading floor in a narrow strip of paper that allowed investors to have an easy-to-read script. Investors, traders, and brokers understood the importance of these quotes. Thus, during the late 19th century, most brokers have an office near the New York Stock Exchange to have a stable supply of ticker tapes. A steady supply of ticker tapes during those times means a stable supply of the latest and most recent stock figures. Brokers receive these latest quotes through "pad shovers" that run back and forth between the brokers and the trading floor. Hence, the shorter the distance between the broker and the stock floor, the more recent quotes they would receive.
As time progress, so is the stock ticker technology. Stock ticker machines introduced in 1930 and 1964 are more advanced and are twice as fast as their predecessors. However, there were still some gaps and delays between the time of the transaction and the time the brokers received them.
However, these delays and gaps were soon fixed with the introduction of electronic ticker in 1996. This electronic ticker made investors, traders, and brokers up-to-date with the latest market transaction in real-time. And the figures of this electronic ticker are the figures you see today on televisions and the internet.
Relevance of Stock Tickers
Stock tickers provide screenshots about the latest activity of the market and specific stocks. The information available in a stock ticker includes which company's stocks have been traded, the number of shares traded, the price, the indication of whether the price is above or below the previous trading, and others.
This information means a lot to investors and traders, especially now that they can have it in real-time. Looking to ticker tapes, especially the colored coded ones (green for a higher price, read for a lower price, blue or white for prices that did not move), can help investors, traders, and brokers to gauge the overall market sentiment. These data also help analysts in evaluating the behavior of the stock and the market.
How to Read Stock Tickers
Stock Tickers shows various information about specific stocks. This information paints a basic picture of the sentiments people have on those stocks. People's sentiments affect the stock price, so it is worth considering when making investment and trading decisions. But how can you consider it when you do not know how to read the stock ticker? The answer, learn to read it. Fortunately, stock tickers are very easy to read, so you will not have difficulty doing it.
To read stock tickers, you need to know and understand the information shown on them. The data that appears in a stock ticker includes five basic components specifically:
1. Ticker Symbol. A ticker symbol is the unique "code" or series of characters used to specify a company's stock. They are assigned to specific securities, e.g., stocks, for trading purposes. In most events, the stock symbol is just a shortened version of the name of the company stocks it represents.
The length of ticker symbols varies, and they can tell a lot, including the exchange where they are being traded. For New York Stock Exchange (NYSE), ticker symbols are three-lettered or fewer. But in some instances, there is a fourth letter placed after a dot at the end of the standard symbol to determine the trading status. On the other hand, companies listed in the National Association of Securities Dealers Automated Quotations (Nasdaq) can have longer ones, typically four to five letters.
2. Shares Traded. This refers to the report about the total volume of stocks traded on a given day. Since stocks are traded in large quantities, the volume is typically listed in thousands or millions.
3. Price Traded Value. The price per share is the price traded value. This represents the last price at which the stock was sold and bought. Sometimes, this could also be expressed or interpreted as the value of the share during the previous trade.
4. Change Direction. This is the triangle shape symbol you see. The symbol is actually an arrow, and it helps determine the performance of a stock. If it is pointed upwards, the stock is trading higher than the previous end of the day trading price. If it points otherwise, it only means that the stock is trading below the last day's closing price.
5. Change Amount. This amount builds on the arrow. It tells investors how much the stock price has changed since the previous day's closing price.
A stock ticker is admittedly not the best way to monitor the market; however, it provides insights into whether a stock is an uptick or downtick. And this could be used to determine the market's sentiments about that stock, which could be helpful when you are investing or trading.